Possible NYSE Delisting Looms

Founded in 2013 by American entrepreneur Kenny Dichter—co-founder of Alphabet City Sports Records, Marquis Jet, and Tequila Avión—Wheels Up is a provider of on-demand private aviation services in the United States and one of the world’s largest private aviation companies.

Wheels Up’s business model is of the membership/on-demand variety—a scheme by which members use a mobile application to book private aircraft and third-party operators.

Wheels Up was the first private aviation concern to be listed on the New York Stock Exchange and is traded under the ticker UP (NYSE: UP).

On 04 April 2023, Wheels Up announced plans to ask its shareholders to approve a potential reverse stock split ahead of a possible delisting notice. A proxy statement filed on the morning of 04 April set forth that the private jet provider will petition its shareholders to vote on the measure at the company’s 31 May 2023 stockholder meeting.

The filing calls for a possible “reverse stock split of our outstanding shares of Common Stock, at a reverse stock split ratio of not less than one-for-five and not greater than one-for-ten, with an exact ratio within that range as may be determined by the Board at a later date [the reverse stock split] and contemporaneously with the reverse stock split, a reduction in the number of authorized shares of common stock by a ratio corresponding to the reverse stock split ratio.”

Wheels Up faces a possible delisting from the New York Stock Exchange insomuch as the company’s share price has been trading below $1 since early March. On 03 April, Wheels Up shares closed at $0.56.

After thirty-days below $1, the company will receive a notice that it is being delisted from the New York Stock Exchange. Wheels Up will then be afforded 180-days to address and correct the deficiency—a reverse stock split being among the most common means by which to do so.

According to Investopedia—a financial media website providing investment dictionaries, advice, reviews, ratings, and comparisons of financial products—a reverse stock split does not directly impact a company’s value, only its stock price. Ergo, subject company remains relevant and avoids being delisted.

On 31 March 2023, Wheels Up announced a restatement of goodwill impairment, increasing its 2022 net loss, although the company alleges cash on hand at the end of 2022’s fourth-quarter equaled $586-million.

Goodwill is an intangible asset associated with the purchase of one company by another. It represents value that can give the acquiring company a competitive advantage. Specifically, a goodwill definition is the portion of the purchase price that is higher than the sum of the net fair value of all of the assets purchased in the acquisition and the liabilities assumed thereby.

Goodwill impairment is an accounting charge that companies record when goodwill's carrying value on financial statements exceeds its fair value. In accounting, goodwill is recorded after a company acquires assets and liabilities, and pays a price in excess of their identifiable net value. Goodwill impairment arises when there is deterioration in the capabilities of acquired assets to generate cash flows, and the fair value of the goodwill dips below its book value.

By dint of the restatement, Wheels Up’s net loss rose from $197-million in 2021 to $555-million in 2022.

Considered through the lens of an adjusted Earnings Before Interest, Taxes, Depreciation, and amortization (EBITDA), Wheels Up lost $185-million in 2022.

Wheels Up projects 2023 will see its losses drop to $110-to-$130-million, and asserts 2024 will find the company EBITDA profitable.

To reduce loss-inducing empty legs, Wheels Up, in March 2023, launched a new King Air program east of the Mississippi River.

According to the company’s Q4 2022 earnings call, Wheels Up members number some 12,000.

FMI: www.wheelsup.com